Partial transcript of Q&A between Sen. Chuck Schumer (D-N.Y.) and Treasury Secretary Jack Lew on the potential impacts of the failure to raise the debt ceiling. The Senate Finance Committee hearing was held on Oct. 10, 2013:

Sen. Chuck Schumer (D-N.Y.):
…This hearing is much needed. I think if it has a purpose, it’s to deal with the debt ceiling deniers. The debt ceiling deniers tried to claim that default won’t be a big deal, middle-class families won’t be hurt. We can just pick and choose which bills to pay – prioritization, they call it.

Well, the debt ceiling deniers need a dose of debt ceiling reality. You’ve given them that today.

Basically, you’ve said or I think you’ve just about these words – you said prioritization is default by another name.

Prioritization is extremely difficult, as you’ve said. Do we pay foreign debts or veterans’ benefits? Do we make sure Social Security benefits go out or pay Medicare? Do we pay for education or do we pay for our troops? American people don’t want that. They would certainly want us to just pass a clean debt ceiling bill and avoid those awful choices.

But I’d like to talk about the other – by the way, one of these debt ceiling deniers I read in the New York Times – a Congressman named [Paul] Broun – he also said that much of what he learned in medical school were lies. They came from – in his words – “the pits of hell”. If we’re letting people like this lead us, God save America.

Now, I’d like to deal with the second issue, which is the timing. In my view, we are like a blindfolded man walking towards a cliff and if we keep walking in that direction, very soon we will fall off. We may fall off on Oct. 16th. We may fall off on Oct. 17th. We may fall off on Oct. 25th or Nov. 1st. But we will fall off.

And the most interesting part – the most important point about this is we don’t know which day we will fall off. The markets are somewhat mystical. They could even a day or two before Oct. 17th come to the view the U.S. is going to default, anticipate that, Treasuries go down in value, interest rates go up, much of our financial system freezes and we’re back where we were in 2008 and AIG failed.

So I just want to ask you this question: To be clear, isn’t there a risk almost every single day starting around Oct. 17th even perhaps a day or two earlier at getting worse? We can’t exactly tell when each day after that we won’t have enough money to pay our bills and default could occur even if you laid out the most meticulous plan in the world?

Treasury Secretary Jack Lew:
Sen. Schumer, I have been trying to be as transparent as possible for several months because I very much fear a miscalculation is something that could lead to unintended but very severe consequence. Since August, I’ve been very clear we’re already in overtime. We hit the debt limit in May. We’ve been using extraordinary measures. You know, we call them extraordinary measures but everyone now assumes that they’re infinite. They’re not infinite. I warned in August that we were going to run out of extraordinary measures sometime in the middle of October. And I even went a step further, which mostly has never been done, and said we’re going to have roughly $50 billion on cash. A month later, based on the year-end tax receipts and expenditures, I updated it and I said no later than Oct. 17th we would run out of borrowing capacity and instead of $50 billion we would have roughly $30 billion.

Now, I think that should indicate that what I said in each of these correspondences is true. It’s impossible to predict with accuracy. We’re talking about enormous variations in day-to-day expenses and in economic activity which generates tax revenues. So it’s impossible to predict with accuracy.

You know, it’s difficult to keep roughly $50 billion in reserve at all times just as a cushion against the unknown. So when you talk about having less than $50 billion and drawing it down, it’s a dangerous place to be. That’s why Congress needs to act to raise the debt limit sooner rather than later.

Sen. Chuck Schumer (D-N.Y.):
Better to avoid a potential cataclysm is pass a clean debt ceiling now, not delay and say, “Well, we can wait until the eve of the 17th or the 19th or Oct. 31st”. Is that right?

Treasury Secretary Jack Lew:
Well, I must say that there’s a parlor sport in Washington of when is the last minute. You can’t do that with the debt limit. With the debt limit, if you look for the last minute and you’ve made a mistake, you’ve done serious damage to the U.S. economy, to the world economy. It’s just not responsible. It’s reckless.

Sen. Chuck Schumer (D-N.Y.):
So would you agree with my analogy – blindfolded man walking towards a cliff and we don’t know exactly what day we will fall off but if we keep walking we will – is pretty accurate?